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Russia-Ukraine war affects Brazilian agriculture

Luiz Gustavo Denardin Bravo 051222 secon crop corn field in brazil.png
NEW OPPORTUNITIES: As farmers cultivate the second crop of corn in the Brazilian Midwest region, the war in Ukraine is opening new opportunities for Brazil to supply the world with commodities.
The conflict is leaving its mark on Brazil's exports, imports and fertilizer prices.

The Brazilian agriculture industry has suffered the consequences of the conflict between Russia and Ukraine. In particular, the war has mucked up exports, imports and the production cost of some commodities.

The rise in the price of fertilizers, oil and its derivatives are the most visible effects. Regarding fertilizer imports, the Brazilian Midwest imported a volume 12.5% lower than the same period in 2021.

This is mainly due to the price of fertilizer. The price per ton increased from $231.05 to $524.42 in just one year. Fertilizer had already been trading at high levels since 2021 and was boosted by the conflict in Ukraine.

In a scenario of high production costs, considering current fertilizer and pesticide prices, the increase in fuel prices is another factor that may limit farmers' margins throughout 2022.

In the Brazilian mid-west, the price of diesel increased the cost of production of second crop corn by an average of 68% from 2021 to 2022.

War strengthens commodity prices

On the other hand, exports were also affected. Soybean oil showed a 212% increase in exports in the first quarter of 2022 compared to the same period last year.

According to the Agro-Economic Alliance's First Quarterly Report 2022, this increase is mainly due to increased imports by India as the country searches for new suppliers to decrease its dependence on Ukrainian sunflower oil.

Cereal and oilseed prices have also increased in Brazil, mainly due to the war. Ukraine is a major exporter of corn. With the war generating uncertainty about the supply of grain, there are new opportunities for Brazil.

Because the Ukrainians are important suppliers of sunflower oil, the conflicts in Eastern Europe have increased the demand for other oils, such as soybean oil, increasing the prices of the grain.

For the coming months, we expect the soybean and corn bag will continue at high levels in the Brazilian Midwest region, and a factor that can pressure prices is the devaluation of the dollar.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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